“Investing” in the Future?

I really like new things. I usually hold back on buying brand new things in order to optimize the thing I currently have. Right now, I have my eye on a Playstation 4, which would allow me to enhance my sloth nature, by playing repetitive video games. I have held off on buying it, because there are still quite a few games I would like to play on my current 6-year-old Playstation 3, which is mostly used for watching Netflix.

A “new” (well 6 years ago) monetary technology that I’ve become interested in is Bitcoin. Bitcoin interests my libertarian side – a decentralized currency that has nothing to do with central banks, and is run by everyone on the network, rather than being run by central banks and governments, who have caused quite a few problems over the past few decades. At the basic level, I appreciate the ease of transactions that Bitcoin allows – as more and more people and businesses accept the currency, it will be easier to carry out secure transfers, getting rid of the risk of theft.

Last month, I was alerted from my credit card company (PC Mastercard) that there was an open investigation on my card and it was being cancelled immediately. I questioned what had happened, but received no answers from my company. I usually don’t make that many “weird” purchases online, and would have preferred to know what company Mastercard had the issue with, so I wouldn’t deal with them again, but my bank was not very forthcoming with that information. Using bitcoin would limit my risk of fraud or misuse of my account information significantly (as long as my password was secure) – I would have much less to worry about when shopping online, beyond the normal scammy items that don’t match what you think you’re getting.

‘Bitcoin Guru’ Andreas Antonopoulos, besides appearing in front of Canadian Senators to answer questions about Bitcoin, was recently on the Joe Rogan Experience (One of my favourite podcasts). One use of Bitcoin that I found very interesting was as an actual currency in areas of the world where banks are almost unseen. These remote areas (according to the discussion held on the show) continue to expand cell phone coverage to various remote villages, which would allow people who are currently still bartering for goods to utilize an easy to use currency. Whether or not this kind of thing could happen remains to be seen, but the sentiment was interesting.
I’m kind of on the fence whether or not I want to put any money into Bitcoin, or any other digital currency. If I were to do so, it would be more to have some “skin in the game” of possible up and coming game-changing economic tool. One Bitcoin today is trading at around $300 CAD. I’m thinking of buying a couple of coins to see what happens over the next few years with the currency – call it a speculative investment. Such a small proportion of my total investments offers an opportunity cost to “real” investments, but also allows me to be somewhere around the ground floor on this new type of currency that most of the world hasn’t heard about yet.
Would you put money into something like this, even a fairly small amount?

2015 Vacation Goal – No Pigging Out For a Month Straight

My wife and I have birthdays which are 3 days apart. For the past few years, we have celebrated by getting out of the energy-sapping cold of Canada to go to Mexico or the Dominican Republic. We have a great time on these vacations- this past year I read 8 or 9 books over the week away, floated around the pool and relaxed in the over 35 degree celsius weather. It is a bit of a drag, coming back to work and the cold, but the December vacation is a nice present to ourselves.

We have been discussing in the past couple of weeks, changing up our vacation schedule. One of the downsides of going on a vacation for us (and most people from my understanding) is the excessive levels of unhealthy food and drink consumed while away. Our problem with a December getaway is that it curtails our week away right into Christmas party and New Year’s season.

People with self-control would probably not understand our issue, but, no matter how good our intention is, we roll into January feeling gross and regretting our overindulgence that took place over the previous three or four weeks. Motivation to eat healthy the 3 or 4 nights you aren’t going out is hard in this season – we inherit a “what’s the point?” attitude, and instead of having a smoothie and a reasonable dinner, choose something much less healthy and much more delicious – hence the decision to change things up.

We are thinking of either changing our vacation south from December to April, with the intention of creating a 4-month long “health buffer” between overindulging, or going away earlier in November instead. One of the main reasons we leave the country to get away is because we dislike the cold so much. We have talked about switching up our conventional “All Inclusive” gorgefest for a more reasonable condo rental somewhere in the southern US, where we could cook for ourselves and go out occasionally, instead of trying to destroy a buffet at every meal.

One of the things I look forward to is time. I would like to leave for 6 or 8 weeks at a time, where flights or driving time work out to a few dollars per day instead of over $100 per day on a week-long trip. I look forward to being able to escape from the cold for the majority of winter, only to come back to Canada for the nice weather. For now though, I’ll work on limiting my long-term exposure to excessive quantities of food.

Do you plan to get away when you retire, or stay home?

My Problem with Pension Plans

I work for a Crown Agency in Ontario. When I tell people where I work, the first thing (especially older relatives) tell me is how lucky I am to have a good pension. My workplace provides a defined benefit pension plan, which gives ma a predetermined benefit at retirement, based on a formula around earnings. At my workplace, this formula is calculated at (2% of my Best Average Earnings) x (Total Credited Service). Best Average Earnings are defined as gross pay for the 60 consecutive highest paid months, with a capped value which I will never get to. The cost of this benefit to me is 6% of my pay, while my employer pays whatever amount the pension plan requires to meet its commitments to my pension benefits.

The Ontario Liberal government has proposed an implementation of an Ontario Pension Plan, which will impact individuals who are not covered by workplace pensions and based on what I have read will be mandatory to enroll. An additional 1.9% payroll tax would be docked from paycheques, with an expectation of employers to match this amount.

While the idea of pensions are good in principal – to ensure that everyone will have money when they are no longer bringing home a paycheque, my Libertarian side takes issue with the fact that I would rather have control of the pension dollars being invested by big financial managers which cost a significant amount of money to essentially achieve average returns. My work pension fund has invested 96% of its assets into Standard Life Diversified Fund, with the residual being invested in Standard Life Real Estate Fund. While I don’t see a problem with either of these investments, as a 25 year old, I would have invested in a much more equities-based portfolio (such as a balanced or aggressive Couch Potato Portfolio).I would have a higher risk profile for my investments, especially when I was younger, giving me the potential for higher returns compared to funds invested on my behalf by the Canadian Pension Plan or my company pension plan.

Rather than implementing these “nanny-state” investment plans, wouldn’t it be better to teach people how to look after themselves? Rather than implementing something like an Ontario Pension Plan, why not spend the dollars on teaching people to do the same thing. The vast majority of the population is more than capable of investing themselves, it’s just not a skill taught in school, or even thought of as important in lieu of a publicly supported and funded pension plan. The downside of a socialist nation is the amount of hand-holding required. I would much rather see everyone treated like adults and be in control of their own finances.

I’m not delusional enough to believe that I would “beat” the returns of the pensions I am forced to be involved with (I have no option to opt-out, and was not asked to opt-in to my work pension plan, and CPP is mandatory), but I just don’t appreciate the lack of choice given to individuals.

Are you in favour of an enhanced Pension Plan, with the added costs?

How Small is Too Small?

So, good or bad, I have now started investing. For the most part, I will probably stick to larger, more well known companies, but these are all mainly in the financial sector and I would like to diversify away from this. Over the years, I have read lots and lots of books on investing, and one of the basic rules is to avoid smaller stocks – to stick with large, diversified companies in order to mitigate a lot of downside risk and volatility associated with stocks concentrated in smaller operations.

One of my friends and I were discussing Acadian Timber Corp (TSE:ADN). He is invested in it, so I took a look at it. The stock has a market cap of $245 million at the time of me writing this, and I probably wouldn’t have picked it up in any of my rudimentary stock screens that I am currently using. The company used to be an Investment Trust, and according to the profile, owns over 1 million acres of forests between Canada (New Brunswick) and the US (Maine), along with managing 1.3 million additional acres. The company has no debt, has a dividend that is currently yielding over 5.5%, with steady revenue and minimal “weird” expenses.

One of the things that I like about reading about companies like this is that they are easy to understand and analyze. This relatively “simple” company – which cuts down a mix of softwood and hardwood for lumber production is much easier to understand for an investor like myself than a complex company like Royal Bank.

I’m not sure if I will invest in this company (or other smallish sized companies). Having a specific market where the products are known and understandable allows for a better personal risk assessment to be made. I can better understand the possible risks as well as upsides of the potential investment, which, as an investor allows me to form a better hypothesis around what I think the stock is going to do. While I can make a technical analysis based on ratios and future cash-flow expectations, I would prefer to comprehend the impact of news I’m reading, rather than scratching my head at the effect of some of foreign news that pops up on the stock that I own.

The question that I have to sort out as I continue on my investing “career” is how comfortable I am with these small companies – whether the benefits of understanding a small-sized, less complex company can be balanced by the potential risks inherent to a small company.

Do you screen out small-sized companies when you are looking for potential investments?

I Need More Time

When is it worth the money?

My answer to this question is usually never. I turned 35 in December, so I am slowly converting my wardrobe over to much more mature clothes – probably closer to what my 87 year old grandfather would wear than what could be deemed fashionable (think plaid flannel button-ups and sturdy shoes). The problem with a lot of the clothes that are in my (super low) clothing budget is that they don’t really fit that well. I could pay someone (around $15) to tailor the clothes to look a little less hobo-ish and a little more stylish, but I may be more than doubling the cost of my investment by doing so.

Beyond paying someone to do this kind of work for me, I could buy a sewing machine (because doing a whole shirt by hand would drive me nuts) and learn how to properly tailor clothes. According to this site, which carried out extensive tests on various beginner machines, the best machine for the money and options is going to cost about $250. I’m going to take their word on the choice of machine, my sewing knowledge was gained through Home Economics over 20 years ago and my skill set is stretched when a button needs replaced. I’m not sure how long it would take me to learn how to sew “nicely” (so I don’t look worse wearing my clothes than I currently do), but I’ll assume a few wrecked $3 shirts and a few hours of time.

For me, the decision to take on a project – a skill I want to learn or a job around the house that I’ve been avoiding comes down more to available time than any other factor. I can usually learn how to do most things by watching helpful YouTube videos – it’s just setting aside evenings or weekends to fit in the time to finish the work in a reasonable period of time that is the problem.

It’s for this reason that I look forward to freeing up a good portion of my time at retirement. I don’t like to have to make these kind of decisions – I’d like to just be able to do what I want to do all of the time, rather than trading off a good portion of my waking hours to a job. Wanting to get started and being excited about reading a new book, starting a new hobby, or working on a project around the house only to remember “oh yeah, I have to fit 40+ hours of work in there sometime too”….kind of a bummer.

The added benefit of being retired, is that my very comfortable “old man” clothing is probably much more appropriate for trips to the Home Depot or puttering around the house than the workplace.

What would you do if you had more time?

It’s Easy to Just Do Nothing

I have a hard time with self – motivation. Proof of this sort of lack drive to complete things can be seen at various half-finished projects all over my house. I have a bedroom that is completely done, except for one piece of laminate that needs to be installed and baseboard that needs to be cut and painted. I have a bedroom that had new flooring installed by my wife and I 3 years ago, and was then used as sort of a place of purgatory for full-use items and the dump (or a donation bin).

I spend a bit of time on the road for work. Most of the time, I pack a book to read, have something to work on (for example, a toque I’m crocheting) – basically anything to do but watch a bunch of long-bearded dudes shoot ducks in a swamp. There is a place in my life to watch mindless television, but I feel much better about doing it if it’s after I have actually done something at least a little bit productive after a day of doing my job.

Around the house, I’ve found that actually imposing deadlines on myself has helped a lot in getting some of the jobs done. For example, I had started painting a room over a year ago and proceeded to completely quit on. In September, I made it a goal to have the small room done in 2 weeks. I would put probably about a cups worth of pain into my paint tray and do about 1/3 of a wall in an evening (about 20 minutes of work), but by the end of 2 weeks, I actually had a semi-painted room complete – a vast improvement in productivity.

I’ve followed the same process with other “jobs” in the past little while as well. I paid off my mortgage in May/June of this year, and had funds available to invest for the first time in September and October. My problem was, like homework to a high-school kid, I would avoid doing any research into stocks or funds that I wanted to invest in for weeks at a time, when in reality I should have used the time I was on Reddit (a favourite time-suck), reading about inane Internet things to find places to put my money I was accumulating in a savings account. I would tell myself that I would do it “tomorrow” (every day), then avoid doing anything.

My solution (right or wrong) was to resolve my avoidance by putting a deadline on the research time. I had to fully review 3 investments by the end of November, which I was able to do, and then had a basis to start investing – with reasons to sink money into something besides “I heard it was good”.

The thing about the painting and the researching (along with most things I use my super-avoidance skills on) is that I really enjoy doing them, and I especially enjoy having something to show for the work I put in. I just seem to not enjoy “having” to do something. Maybe it’s a holdover from room-cleaning directives from my mom, or maybe it’s just part of my personality that the jobs that actually need to get done are usually the last ones that I want to do.

Marriage as Part of My Financial Plan

I write about my quest to Financial Independence as my own plan. In reality, the whole thing really doesn’t work without my wife being in at least a little bit of agreement over what we’re up to. The premise of my financial plan (along with most peoples) is attentive spending – to at least consider if what we’re spending money on is the best place to spend it, or if it would be better to save the money to spend when we’re done work.

I am the driving force of financial ideas in my house, and tell my wife what I’m thinking, and what we would have to do to get to the goal in mind. On her end, she decides whether the idea I am proposing is ridiculous, or if it makes sense. Her general feeling is that she would prefer to work fewer, rather than more years, and whatever helps her do that she’s okay with (as long as it doesn’t cut into her “disposable” clothing and accessory budget).

One assumption of our financial plan is that we stay married. I’m not too sure what the end impact of divorcing would be, but I don’t think it would be very profitable for our household Early Retirement “business”. We will have been married 6 years this March, and I don’t see anything significant happening that would change either of our minds about each other, but that’s not really how that kind of thing works, does it?

We want to ensure that our relationship stays strong, because outside of financial reasons, it just makes sense. We made the decision before we got married that we were not going to have kids, and in October, I took surgical steps to ensure that this decision would be permanent. Neither of us was entirely enthusiastic with the prospect of raising a little human for 2 decades of our lives, and liked our life how it is. The way I looked at it, whether I was with my wife now, or not, (for whatever reason we were no longer married) I knew I didn’t want kids, it was much less invasive for me to have a 15 minute out-patient procedure done, then for my wife to go through something similar.

Our financial plan or budget is set up to cause as little stress to our household as possible. We paid off all of our consumer and house debts as quickly as possible to lessen our monthly “fixed” debt. We are currently using this money to invest for retirement, but if either of us have a significant job change (either by choice or otherwise), it won’t be a big deal for one of us to cover what is owed.

According to most lists of marriage stressors, money and kids lead the way as reasons for marital discord and breakups, we’re hoping that our personal and monetary choices will reduce the chances that the costly step of divorce has to be taken. These two decisions we have made, around not having kids and maintaining a simple financial plan, both assist us in living the life we want to live, have the added benefit of hopefully reducing areas of marital trouble. We are able to maintain our chosen modest lifestyle, to have stress-free fun together, with the hope that we will be able to stay married through retirement.

Here’s hoping it works! (I’m not sure I would be able to handle dating).

Being Financially “Set”

“I’m financially set as long as I avoid emergencies, like headphones breaking or running out of toothpaste” – @Ron_Flem (from /r/standupshots).

I think that most people have lived this way at some point in their lives, sort of on the cusp of Economic disaster. Most of my student life was spent on the brink like this, but because of irresponsible spending of my student loans, I never really felt the financial pinch too much. I left school with about $25,000 in student debt – more debt than some people, but not as much as others. If I were to allocate where I spent all of the money, probably less than half of it would have been on actual school related expenses, while the rest of it would be classified as “leisure activities”.

At the time I was accruing all of this debt, I don’t think I felt I was doing anything improper – I was pretty ignorant of personal finances, and felt that I was in decent shape. I also knew that if I got into too much trouble, I could probably get some money from my parents to get me through the school year, before I could start another minimum wage job over my summer vacation to build up my cash reserves.

As I get older, my idea of being financially set is much different. I don’t think I would be overly secure living paycheque to paycheque anymore. I would worry about what would happen if my furnace conked out in the middle of a couple of weeks of -20 celsius days, or my car being “unfixable”. I don’t think I would enjoy the stress that this kind of lifestyle would cause, relative to my current, more secure circumstance.

I can see myself heading into retirement being even more conservative financially. The transition from working a paying job with a fairly dependable salary to retirement will be fairly drastic. The thought that the money that my wife and I have saved in our working years has to last us until we die is also fairly stressful, and will definitely result in some rethinking and doubt I’m sure. It seems like when it’s time to retire, it will be a situation where I will review and recheck my retirement budget calculations and hope that “Real Life” follows the assumptions I’ve made.

For now though, most of the things I look at spending money on are unnecessary extras, like video game systems, golf clubs, and other toys, rather than necessities to life, like rent or food. We are (by my definition) “Financially Set”, which is a good, stress-free feeling.

Do you see yourself as “Set”? If not, what could you change or what would need to change in your life to put you in this situation?